Managed Care Outlook

Feds adjust Medicare spending growth projections downward


The medium-term forecast for Medicare spending has brightened considerably, according to the boards of trustees of the Social Security and Medicare trust funds. The boards’ most recent projections are that per-capita increases in Medicare spending will be lower than previous projections and that Medicare spending as a whole will grow more slowly than spending in the private sector. Medicare spending is now expected to be about $2,400 less per beneficiary in 2019 than projections made four years ago predicted.

The change in Medicare spending projections is partly because of the ACA and provisions that affect reimbursement formulas, such as the penalty for hospitals with high rates of preventable readmissions. This provision alone led to 150,000 fewer readmissions between January 2012 and December 2013, according to an HHS report issued late last year.

Demographics are still tugging the projections for overall spending upward. Total Medicare spending is expected to climb from 2019 to 2023 as baby boomers get older and become eligible for coverage. In fact, the trustees’ actuarial crystal ball predicts that, as a percentage of GDP, Medicare costs will surpass Social Security in 2052.

Per-capita Medicare spending will be less than previously projected

About $12,500 per beneficiary in 2019, instead of nearly $15,000

Social Security and Medicare costs as a percentage of GDP

Sources: Status of the Social Security and Medicare Programs, a Summary of the 2014 Annual Reports, Social Security and Medicare boards of trustees; Kaiser Family Foundation, Visualizing Health Policy: Medicare Spending, JAMA 2015:313;19.

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